Indonesia has dealt a critical blow to TikTok's bold plan to turn millions of users into shoppers.
On Wednesday, TikTok, which is owned by the Chinese technology firm ByteDance, suspended its shopping platform in the Southeast Asian country to comply with new government regulations. TikTok Indonesia said in a statement on Tuesday that its “priority is to remain compliant with local laws and regulation” and as such will “no longer facilitate e-commerce transactions in TikTok Shop Indonesia”, starting 5:00 pm local time on Oct. 4.
Last week, Jakarta announced that it would require tech companies to separate their e-commerce offerings from their social media apps, thus banning users from buying and selling goods on platforms like TikTok and Facebook.
Indonesia, Southeast Asia's largest economy, is home to some 125 million TikTok users, making it the platform's second largest market after the U.S. ByteDance bet big on the country, choosing it as the first non-Chinese market for its social e-commerce service in April 2021. As late as June, TikTok CEO Shou Zi Chew said the company would invest billions of dollars in Indonesia and other countries to further expand its footprint in the region.
Yet last month, Indonesian president Joko Widodo complained that social media-based e-commerce threatened the country's micro-, small- and medium-sized enterprises. Officials have previously accused TikTok of allowing predatory pricing on its platform and said it harmed local businesses. To give an idea of the business landscape, Indonesia has more than 64 million micro-, small-, and medium-sized enterprises that contribute over 60% of the country's GDP.
How important is e-commerce to TikTok?
E-commerce is big business for ByteDance. In China, consumer spending on Douyin—the Chinese version of TikTok—increased by 76% year-on-year in 2022 to hit $195 billion, The Information reported.
Yet Bytedance could struggle to replicate its Chinese success globally. In addition to Indonesia, TikTok Shop is also available in other Southeast Asian countries like Singapore and Vietnam, but it faces competition from other players such as Shopee and Lazada, the latter of which is majority owned by another Chinese tech giant, Alibaba.
TikTok is also trying to generate e-commerce revenue from the U.S. TikTok Shop officially launched in the U.S. in mid-September. Yet low-quality offerings and the company's policies on sharing consumer data are turning off some of TikTok's prospective partners, Fortune reported during the week of the service's launch.
The app is also in the crosshairs of U.S. lawmakers who see TikTok as a national security risk. The U.S. already bars the app from government devices, and some officials and legislators are considering an outright ban of the social media app.
